Taylor v. Bouissiere

Opinion

TAYLOR, J

*

This appeal raises a question apparently of first impression in California: Whether a security assignment of a leasehold interest is a security interest in real property within the meaning of Code of Civil Procedure section 726,

1

thereby invoking the “one action” rule requiring a creditor to first exhaust the security before seeking a personal judgment. We conclude that it is not.

[1199]

Appellants Bouissiere bought a hair design business for $50,000, giving sellers and respondents Taylors their $35,000 promissory note secured by a security agreement on business furniture, fixtures and equipment. As additional note security, they gave their written “Assignment of Lease as Collateral Security,” encumbering their tenants’ leasehold interest in the business premises.

The Bouissieres paid the note down to $17,863, but then stopped paying. The Taylors sued on the promissory note, and moved for summary judgment. The Bouissieres opposed, admitting the unpaid obligation, but contending the lease assignment constituted real property security. They claimed section 726 prevented the Taylors from recovering a personal judgment before first realizing on their security. The trial court granted summary judgment, and the Bouissieres appeal.

Under the “one action” rule of section 726, whenever an obligation is secured by a deed of trust or mortgage on real property, the creditor cannot sue the debtor for personal liability until the security has been exhausted.

(Roseleaf Corp.

v.

Chierighino

(1963) 59 Cal.2d 35, 38 [27 Cal.Rptr. 873, 378 P.2d 97]; 1 Miller & Starr, Current Law of Cal. Real Estate, Deeds of Trust and Mortgages, § 3:82.) However, the “one action” rule does not apply to personal property security.

2

If the security is personal property, the creditor’s right to sue for personal liability on the debt is not restricted by any obligation to look first to the security.